Investment Marketing: Financial Advisors' Daily Digest

by: SA Gil Weinreich


Eric @ Servo: We live in the golden age of financial advice.

Ronald Surz: Advisors can save active investment management.

Aristofanis Papadatos: Shorting stocks is hazardous to your wealth.

You walk into a car dealer looking to buy a Hyundai Accent, a small inexpensive, practical car, and you walk out with a Subaru BRZ - also the right size, but cool-looking and with nifty features, and twice the price. You're thrilled with your purchase, your spouse less so.

Things like this happen all the time, so why are people so surprised when it happens in the financial advice space? It's not unusual to see vituperative anti-financial-advisor remarks in the comments section of articles as if advisors are out to get somebody; no, they show up at work and are doing their job, and along comes a customer who, it turns out, wants what they're offering. The consumer who bought the more expensive car may have been upsold but, at some level, wanted what he bought.

It's called marketing. We're constantly being marketed to, and marketing is effective because it plays on what we want, or creates an appetite for what we want. I think Ronald Surz describes the phenomenon brilliantly in his article on active management on today's SA:

Because it is so competitive, investment management is more about marketing than investment returns, so blaming managers for your investment failures is like blaming the foxes for eating your chickens when it's your watchdog who has failed."

Since marketers are constantly at work (in every field) actively shaping your wants, the best approach may be to educate yourself ahead of time and shape your own wants! When it comes to the question of selecting a financial advisor, unadvised investors might benefit by investigating that topic now. Eric @ Servo argues that we live in the "The Golden Age of Financial Advice" and suggests an approach to advisor selection informed not just by the work he currently does but, importantly, by the work he previously did and ran away from:

When I first entered the advisory business almost 20 years ago, I didn't receive the type of training you would expect for someone helping individuals and families make smart financial decisions over the course of their lifetimes. I spent a few weeks in sales training designed to understand the plethora of products the firm sold, and how to overcome objections that customers had to the sales process."

Some prospects walk into the sort of office described above and come out as clients. But that does not mean they were snookered. I've met people who quibbled about the returns they were getting from their advisor but liked the advisor, the office, the location, the coffee or whatever. They were purchasing not just investments but an experience. If you feel this is less than the optimal way to invest, then you owe it to yourself to educate yourself about all the options. Let your decisions be yours and not some marketer's.

We welcome your thoughts in our comments section. Meanwhile, here are today's advisor-related links:

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